Recovery or Ponzi scheme?

You've heard the good news about the economy. The bad news is that the good news ain't so good. Let's take a brief tour...

The Confluence:

While Wall Street parties in a sea of greenbacks, Main Street suffers under record unemployment, foreclosures, and poverty while facing significant increased prices on necessities such as food. The declaration of economists and our political leaders that this obscene display of nose-thumbing is somehow an indicator of “economic recovery” demonstrates their total disregard for the average citizen.

To which one reader responded:

If you were thinking of cashing in some stocks, now would be a good time. This is like the high returns phase in a ponzi scheme...it’s to lullaby you into buying and or staying

Robert Reich credits the good times on Wall Street to higher corporate profits due to the slashed work force. But fewer workers means fewer consumers and thus, in the end, fewer profits. Reich:

Investors of all stripes want to get in early and ride the wave. Pension funds, mutual funds, and other institutional investors figure the bull market has more oomph in it because, well, other investors will jump in. Think Ponzi scheme. Nice for now, but watch out if you're one of the last in.

In other words, this is all temporary fluff, folks.

Accent on temporary. A comment on Mother Jones echoes the point:

All of the knowledgable commentators (Ritholtz, Krugman, CR, Yves Smith) have pointed out that this market rally is entirely a function of three things:

* A bubble (yes, a bubble) in financial stocks with poor fundamentals

* GDP values distorted by a one-time improvement in inventory levels

* A short squeeze.

This will not last. All metrics other than the market are very, very bad.

Bill George:

We are far from out of the woods. Large companies are still laying off employees. When we cross the 10% unemployment line, consumer spending (now down to 70% of GDP) may contract even further. It probably should. Consumer spending in the UK is 65% and in China it’s only 40%.

Haven’t we learned something from this crisis?? Wall Street sold the world worthless securities, trillions of dollars of wealth evaporated, and now Wall Street is cheering this “new” bull market. Now the bulls say it’s all okay again?!

George Washington at Zero Hedge says that the crisis, created by the Wall Street ponzi schemers, will not abate until the miscreants are punished.

CNBC interviews UBS head Art Cashin:

Cashin said he doesn't think the economy is moving as much as data shows, and he's worried there are billions of dollars in excess reserves from people not borrowing.

He added that although it's difficult to compare today's environment with any other time in history, it reminds him of the dot-com bubble, when people refused to believe the markets would go anywhere but up.

CNN Money:

"We're not at Armageddon anymore, so of course you should have some kind of rally," said Rich Yamarone, director of economic research at Argus Research. "But I think there's a bubble-like atmosphere going on here in the rush back to 10,000. Caution should rule the day. We're not out of the woods yet."

"The companies are cutting fat, and in many cases cutting bone and muscle. There's no organic economic growth there," said Yamarone.

Bottom line: If you are in the market, pull out now.